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Saturday, February 13, 2016

When stock markets become volatile, investors get nervous. In many cases, this prompts them to take money out of the market and keep it in cash.
Cash can be seen, felt and spent at will, and having money on hand
makes many people feel more secure. But how safe is it really? Read on
to find out whether your money is safer in the market or under your
mattress.All Hail Cash?There
are definitely some benefits to holding cash. When the stock market is
in free fall, holding cash helps you avoid further losses. Even if the
stock market doesn't fall on a particular day, there is always the
potential that it could have fallen. This possibility is known as systematic risk,
and it can be completely avoided by holding cash. Cash is also
psychologically soothing. During troubled times, you can see and touch
cash. Unlike the rapidly dwindling balance in your portfolio, cash will still be in your pocket or in your bank account in the morning.However, while moving to cash might feel good mentally and help you
avoid short-term stock market volatility, it is unlikely to be a wise
move over the long term. A Loss Is Not a LossWhen your money is in the
stock market and the market is down, you may feel like you've lost
money, but you really haven't. At this point, it's a paper loss.
A turnaround in the market can put you right back to break even and
maybe even put a profit in your pocket. If you sell your holdings and
move to cash, you lock in your losses. They go from being paper losses
to being real losses with no hope of recovery. While paper losses don't
feel good, long-term investors accept that the stock market rises and
falls. Maintaining your positions when the market is down is the only
way that your portfolio will have a chance to benefit when the market
rebounds.Inflation Is a Cash KillerWhile having cash in your hand seems like a great way to stem your losses, cash is no defense against inflation.
You think your money is safe when it's in cash, but over time, its
value erodes. Inflation is less dramatic than a crash, but in some cases
it can be more devastating to your portfolio in the long term. Opportunity Costs Add Up.Opportunity cost
is the cost of an alternative that must be forgone in order to pursue a
certain action. Put another way, opportunity cost refers to the
benefits you could have received by taking an alternative action. In the
case of cash, taking your money out of the stock market requires that
you compare the growth of your cash portfolio, which will be negative
over the long term as inflation erodes your purchasing power, against
the potential gains in the stock market. Historically, the stock market
has been the better bet.Time Is MoneyWhen you sell your
stocks and put your money in cash, odds are that you will eventually
reinvest in the stock market. The question then becomes, "when should
you make this move?" Trying to choose the right time to get in or out of
the stock market is referred to as market timing. If you were unable to
successfully predict the market's peak and sell, it is highly unlikely that you'll be any better at predicting its bottom and buying in just before it rises.

Common Sense Is KingCommon
sense may be the best argument against moving to cash, and selling your
stocks after the market tanks means that you bought high and are selling
low. That would be the exact opposite of a good investing strategy.
While your instincts may be telling you to save what you have left, your
instincts are in direct opposition with the most basic tenet of
investing. The time to sell was back when your investments were in the
black - not when you are deep in the red.Buy and Hold on Tight.You were
happy to buy when the price was high because you expected it to go
higher. Now that it is low, you expect it to fall forever. Look at the
markets over time. They have historically gone up. Companies are in
business to make money. They have a vested interest in profitability.
Investing in equities should be a long-term endeavor, and the long term
favors those who stay invested.Serious
investors understand that the markets are no place for the faint of
heart.This is also the time to review the strength and weakness of our portfolio and make necessary reshuffling to make it ready for next up move.Don't hesitate to sell the stock of a company in loss if we could find a better opportunity in another one considering the changing business environment.

138 comments
:

Good article sir, hope sanity returns soon in stock markets. In recent times there has been a lot of carnage in mid & small caps, are there any stocks which are unnecessarily beaten down without any chance of fundamentals and can give multibagger returns few years down the line. Also please share your views on magna electro castings at cmp should one add onto it.

In case of corporate results , unfortunately it is one of the worst quarter in past many years albeit India's GDP data showing 7 % + growth.Really wondering about the data and ground reality .As stock prices and corporate earnings are closely linked it is no wonder for a correction in stock prices to adjust with expectation and reality . Lot of global factors also affecting this carnage . But if we study history,such factors are part of market and it is cyclical in nature . This will come and go but whether an investor can survive such carnage and remain in market till the cycle turns is the question .Leveraged positions, investing time bounded funds in market ..etc are the biggest mistakes retail investors normally commit each and every time. If you invested in a company with good business model and decent management , it will come back when the shake out is over .Meanwhile one should analyse whether there is any fundamentally negative happened to the company we are invested and take decisions accordingly . If our capital is limited there is nothing wrong in switching from a company with bleak prospects to bright prospects at any time.

As you are aware there is certain limitations to recommend name of companies here from June 1,2015.

Due to increase in raw material cost and not so good financial situation in Japan ( the biggest market of Company) , In case of fresh entry I prefer to take a call after watching the next few quarterly results.

Hi VP Sir, Websol posted very good result today. Real turn around story. Very good pick by you Sir. Posted net loss of 17 lakhs Vs loss of 95 lakhs YoY , posted loss of 17 lakhs vs 1.24 crores QoQ. Almost posted profit but due to expenses cost, it posted slight loss. Hope it turns profitable from next quarter. Thanks for your turn around picks Subex, which posted very good result and Websol which is showing improvement every quarter. Your views please. Can you also share your views on il&fs engineering which posted loss this quarter also. I am feeling that until it find out a way for fund raising, we can't see any improvement in il&fs engineering results. I don't see any major news on fund raising as well.

As you mentioned fund raising at the earliest is important in case of IL&FS Engineering .Though it is one of the companies with highest order book ( More than Ten Thousand Crores) execution delay is happening due to working capital crunch.

when there is no fund in the company to execute the orders and its well know to the entire world , why still companies are giving order to IL and FS ? even after knowing there will be delay in projects ?

Sir Rightly said I too hve experienced that if quality of stock we hold is good, gains in portfolio occur once again after some time. Thanks. What is your view on Hindustan Construction Company and Pipava Defence.

Sir, can u please hint us any unnecessarily badly hammered down good stocks?Which one of Orchid Pharma, SKMEggProducts, suzlon, aban offshore, salzer elec, tanla, mindtech, enkei wheels, intl travels make it to your list of being a valuepick at current price in your opinion?

If government extent the time period for exemption of LTCG tax , a knee jerk reaction is expected to happen . But market is already in pathetic situation and govt failed to raise targeted amount through stake sale of PSU's due to bad market .In such a situation whether government will take such a decision is a point one should wait and see.

Sir,Most of the companies go up when they win any order from some other entity but later on the price goes down as market seems ignore these news... e.g. IL&FS engg ... good order book but price going down...

Do you know how should small investor track the progress of these orders ?

Dear Sir,You are not responding anything for your recommanded havily beaten down stock i.e.Mindtek.Your goodself started discussing Mindtek on Rs.170 & today it is on Rs.76 only.Kindly let us know your view on this company with long term holding view.I have invested after seeing your view on MMB on Rs.170/-Kindly reply please.Regards

Respected sir, Desperately need your advice on mindtek. I am struck in this stock @ 160. Is it a hold after latest qtrly results. Unable to understand recent carnage in this stock. Though I am a long term investor, but will it be worth holding this stock. Further I could not find ur earlier comments which u have referred in ur previous post. Eagerly waiting for ur valuable advice. Thanks

Sir during recent slump, thought to search for some good undervalued companies with good management but beaten down prices. Thinking of Tara Jewels, Bhandary Hosiery, MPS, Virinchi Tech and Vedavaag Systems. Do u Track any of these. If so, kindly help.

Sir,I know overall market trend is down. However, there seems something wrong in SKM and some insider news is causing huge crack in stock price. What is your view? The price is very attractive and valuation is become very cheap. Should we add? I am ready to add - just waiting for your word. Thank you.

Sir, based on your comments to various queries it appears you are suggesting to sit tight with what one has and not to add more to average out some that appear attractive at this time for investment , thanks

'Not to add more' is not a general suggestion. Strategy should be take based on case to case basis.While considering a purchase decision based on fall in price correction , one should look into possible changes in fundamentals too .

Lot of investors concerned about a steep fall in its stock price and some vested interests spreading messages to create panic among investors of this company as the fall was due to some fraud of management or something like that. But I believe there is no such issues and this fall is only due to some short term business related troubles like higher raw material price,possible reduction in demand from Japan due to their economic condition ..etc . Stock market will always react in advance and that's why I suggested to wait for a while for fresh exposure and take a call only after seeing how much is the impact of such factors which may visible in next one or two quarters.

Please provide your clear opinion on Lakshmi Energy.. why I am asking this is your comment on FB says "Its an unfortunate" it is a confusion.. please let us know the pick it self is unfortunate for you or this quarter results only.. your comment matters .. even though we are dully studying about the company to take a decision your comment also matters to many people...

Sir .as far as i understand other than europe's growth problem there is no fundamental fear in cox &kings business model .then why the fall is so severe? Is there anything beyond my understanding . Please illuminate

Hi sir,I have recently started reading your blogs. I have a query.U had suggested Arrow Coated Products @ Rs 12. Currently the stock is @ Rs 487. Can i buy Arrow Coated at this price. Please suggest.Thank You

There may be more than one reasons . Company planning rapid expansion and in such a stage advertisement cost will be higher . Since it was going through merger process , as part of balance sheet cleaning ,write off of around Rs.35 Cr accounted.

Dear VPg, how is health condition of Suzlon? You said that you are tracking Suzlon. Please let me know your opinion/ views on Suzlon. In mmb there is lot of confusion among all the members including platinum. Please share your views. Thank you.

Non conventional emery related business in India is highly dependent on government policies .Let us wait and see whether there is any positive steps in upcoming budget . Recently government paying more attention to Solar than wind , which is a point to keep in mind.

Hello VP sir, Can you please give your views on Pioneer Embroidery. I regularly average the price by buying more and plan to hold it for 3-4 years.why is the stock falling daily. Thanks and Regards Govind

Sir, you had expressed that Company is proceeding in right direction. I guess no fundamentals has changed after the same. I believe it is the general falling market that's pulling the price down. Correct me if i am wrong.

Had a chat with Management and they conveyed that Sales to Singapore will start in coming FY and we should see consistent growth from here. Being Silver Jubilee, it looks, they are pushing to get the company back on strong grounds.

I too was wondering on this, but when I went through the website of Zicom, I found following about its Group Company: Phoenix International WLL is one of the growing Engineering Services Companies, in the Middle East with its world headquarters at Qatar.

VP Sir - Feel like you are less active nowadaysNo new post and less comments to read.I believe this is the time we need a mentor like you to guide us to be financially independent by owning stocks long term.If possible could you provide a few recommended stocks which are at cheap levels and can be brought during this bear market.

For the past many years spent too much time in front of computer screen,as a result facing some issues for eyes and forced to reduce time spend on it, hence least active for past few months.

Many investors are ready to buy stocks now as they feel stock price came down drastically in many cases. It is not a bad strategy but the only think we need to keep in mind is , we should check whether the fall in price is only due to overall fall in market sentiment or due to any specific business challenges for the particular company .

Dear Sir, a very good article at the right time. Hope the budget does not add more fuel to the fire and hopefully things should settle down very soon. Whats your view on Ador welding? Stock has corrected 30% from recent highs. Is it good time to average?

Ador Welding is an already suggested stock around Rs.120 and its current price is above Rs.240. It is a decent company from this sector but this entire sector is highly dependent on Industrial activities( mainly Automotive,heavy engineering..etc ). stock is expected to gain ground once there is growth in these sectors.

Up and down are common in any business. In case of almost all products, there may be temporary demand fluctuation when the entire economy of consumer country passing through tough times . This is applicable in case of any company and SKM may not be an exception.Unfortunately at the same time there is an unexpected rise in its raw material cost . So , short term challenges are there and it is a fact . Company strongly came back from even pathetic situations in past and I hope they can overcome these issues in long term though there is short term headwinds .Hence the investor strategy should be based on the time period of Investment one is planning to make.

Sir any idea why Satin creditcare is falling is it due to overall negative sentiment or any change in fundamentals which i couldn't pick up or you spotted and is it buy at these rates what you would have done in this situation.